A photograph of Taneka Talley was made available by her family in Vallejo, Calif., on Wednesday, Nov. 26, 2008. Talley was fatally stabbed to death in 2006 but her insurance company is refusing to pay benefits to her son claiming the murder was racially motivated.

Photo: Talley Family, Courtesy To The Chronicle

A photograph of Taneka Talley was made available by her family in...

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Carol Frazier, looks at family photos with her daughters Taneya Talley, center, and Shameana Talley at their home in Vallejo, Calif., on Wednesday, Nov. 26, 2008. Frazier's other daughter Taneka Talley was fatally stabbed to death in 2006 but Talley's insurance company is refusing to pay benefits to her son claiming the murder was racially motivated.

Photo: Paul Chinn, The Chronicle

Carol Frazier, looks at family photos with her daughters Taneya...

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A photo of two of her daughters and an open Bible are displayed on Carol Frazier's coffee table at her home in Vallejo.

Photo: Paul Chinn, The Chronicle

A photo of two of her daughters and an open Bible are displayed on...

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A photograph of Taneka Talley and her son Larry Olden was made available by her family.

Photo: Talley Family, Courtesy To The Chronicle

A photograph of Taneka Talley and her son Larry Olden was made...

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Carol Frazier, left, pauses while looking at photo albums with family at her home in Vallejo, Calif., on Wednesday, Nov. 26, 2008. Frazier's daughter Taneka Talley was fatally stabbed to death in 2006 but Talley's insurance company is refusing to pay benefits to her son claiming the murder was racially motivated. Seated next to Frazier is Talley's father and Frazier's other daughters Taneya and Shameana, far right.

Dollar Tree, facing a public furor for denying death benefits to the young son of a slain African American employee in Fairfield, said Monday that it has offered to pay the full amount allowed by California's workers' compensation law.

The retail discount chain had been silent in the face of widespread anger over the disclosure that its insurer insisted 26-year-old Taneka Talley's death was not work-related because the killer was allegedly motivated by the victim's race.

In a statement Monday, Dollar Tree said it was acting voluntarily because "we feel this is the right thing to do." But a lawyer for Talley's mother and guardian of her 11-year-old son said the company was clearly responding to the public anger that followed news coverage of the case.

"I think they would like this to be done with," attorney Moira Stagliano said. "The media helped settle this claim."

Stagliano said she's optimistic about resolving the case but isn't there yet. "What they have offered is not quite the full value," and negotiations are continuing, she said.

Her client, Carol Frazier of Vallejo, who gained custody of her grandson, Larry Olden, after her daughter's death, said she would let Stagliano speak for her.

Talley was stabbed to death March 29, 2006, while stocking shelves at the store on North Texas Street in Fairfield, where she worked full time as a clerk to support herself and Larry.

Tommy Joe Thompson, 45, of West Sacramento was arrested later that day and has been charged with murder in her death. His trial in Solano County Superior Court had been scheduled to start last week but has been postponed until at least Wednesday.

At a March 2007 hearing on Thompson's mental competency to stand trial, a defense psychiatrist, Herb McGrew, testified that Thompson had told him he stabbed Talley because she was black. Thompson is white.

A lawyer for Dollar Tree's insurers later cited that exchange in a letter to Stagliano defending the denial of workers' compensation benefits to Talley's son.

"The doctors testify that Mr. Thompson's motivation in stabbing Taneka Talley was purely race motivated," attorney Kelly Hamilton wrote. "As such, it is our belief that our denial in this matter was proper."

The state's workers' compensation law requires employers to pay benefits to employees or their survivors for all work-related injuries and deaths, regardless of whether the company was at fault. On-the-job injuries are not covered, however, if they arise from purely personal motives - for example, if an estranged spouse comes to the workplace and attacks an employee because of a private grudge.

Stagliano said that there was nothing personal about the attack from a total stranger, and that if Talley hadn't been at work that day, she would still be alive.

She appealed the denial of benefits to a state workers' compensation court in Oakland. The minimum death benefit is $250,000. And, in this case, an additional $75,000 or more should be added in periodic payments due until Larry turns 18, Stagliano said.

Meanwhile, some customers have called for a nationwide boycott of Dollar Tree, and protesters picketed the Fairfield store two Sundays ago.

In Monday's statement, Timothy Reid, Dollar Tree's vice president for investor relations, said the company had offered to pay "the full workers' compensation benefit permitted under California law."

"Taneka Talley was the victim of a despicable crime," Reid said. "While we were advised that the claim would not be covered under the state workers' compensation law, we feel this is the right thing to do for Taneka's son."